Sterling slides against resurgent dollar

The pound lost more ground against the dollar today as poor retail sales figures followed a surprise rate hike last night from the US Federal Reserve.

Toppling: Sterling has slipped against the US dollar

Sterling dropped from nearly $1.55 in overnight trading to $1.53 at one point this morning, also undermined by some bad UK retail figures.

It represents the lowest price for the pound since May 2009.

The dollar rallied overnight after the Fed's surprise hike in the discount rate. Although it is not the benchmark Fed funds rate, raising the penalty rate charged to banks for seeking emergency funds from the central bank, indicates that the US authorities are bullish on the economic outlook.

It also provided a possible indication that a hike in the Fed rate could be on the horizon, and that this is likely to happen before the Bank of England adjusts rates in the UK.

But the Fed played down suggestions that the move was part of a broader tightening of monetary policy as the US economy recovers.

Friday's problems for the pound were not helped by poor UK retail sales figures. Data compiled by the Office for National Statistics showed a 1.8% fall - the biggest month-on-month decline since the early stages of the economic slump in June 2008.

James Knightley, senior economist at ING, described the figures as terrible news for the pound.

He said: 'UK retail sales figures for January are awful. This points to very modest retail sales growth through most of this year, which will keep Bank of England rhetoric dovish and sterling under pressure.'

Britain's currency has now lost 4 cents against the dollar in a matter of days, dropping from $1.58 to less than $1.54 since Wednesday's trading, and has been hurt in particular by growing concern over the state of Britain's public finances this week.